Why employers think that the 340B program needs a reform

The 340B medication pricing program was created in 1992 and allows hospitals and clinics that deal with a large population of low -income patients who are not guaranteed to buy ambulatory prescription drugs at reduced prices.

It was intended to support suppliers of safety nets and to help them extend their financial resources to serve more vulnerable patients. But since its humble beginnings, the program has developed in an exponential way. Between 2000 and 2020, the number of covered entity sites participating in the program increased from 8,100,000. In 2023, the covered entities of 340b bought $ 66.3 billion in ambulatory drugs covered through the program, compared to $ 2.4 billion in 2005.

It has been well documented that pharmaceutical companies have their problems with the 340B program. Several continued the government – including Johnson & Johnson, Sanofi, Elofi Lilly, Bristol Myers Squibb and Novartis – after the administration of resources and health services rejected their proposed model for 340B which would provide retrospective hospital discounts instead of initial discounts on drugs. The judges ruled against pharmaceutical companies in these efforts.

Some legislators have also targeted the program, notably Senator Bill Cassidy (R-Louisiana), which published a scathing report on the 340B program in April. The report has expressed its concerns concerning if the program really benefits low -income and not insured patients.

But there is another stakeholder – and which may not make all the big titles – who thinks that the program needs change: employers.

Several employers’ defense organizations, including the National Alliance of Healthcare Buy Coalitions, maintain that the 340B program allows hospitals to “buy low and sell high”, allowing them to buy medicines to a significant discount and invoice patients with full price.

Although they are in favor of the initial intention of the program, changes must be made, according to employers.

“I have no problem with 340B,” said Shawn Gremminger, President and Chief Executive Officer of the National Alliance of Healthcare Buy Coalitions, in an interview. “We have no problem with the fact that we know that the employer’s money, actually, goes to these institutions. Rural hospitals … need money. It is the abuses by very important institutions, very profitable and exempt from tax which, I think, must change “, specifically calling systems like Cedars Sinai and Cleveland Clinic.

How 340B has an impact on employers

According to Gremminger, the 340B program has a negative impact on employers. The first is that when a drug is filled via the 340B channel rather than through the employers’ PBM, the employer loses his discount (although the discount system is one of the reasons why the inherited PBMs are held in a bad day).

“We believe that the discounts are stupid, and we know that the PBM keep many of them. But in the end, we pay a reduced price, whatever the negotiated price,” he said. “In less than 340B, this does not happen, because our PBM does not touch it. The patient goes to the contractual pharmacy, fills the script, pays his co-payment, just as they would do it elsewhere, but he goes back to the hospital. The hospital is able to write the 340B delivery as a income for them, and we pay the full price of the medication. ”

Due to the loss of discounts, employers lose approximately $ 6.6 billion per year, according to alliance data.

Gremminger’s comments on the 340B program were taken over by Bret Jackson, president and chief executive officer of the Economic Alliance for Michigan.

“For many years of the program, it worked as planned, and I think it is only in recent years that essentially business health care has understood how to maximize it and take advantage of it. Huge benefits, ”said Jackson.

Gremminger de l’Alliance noted that in addition, the 340B program encourages the consolidation of the hospital. Doctors in private practice cannot participate in 340B.

“As soon as you are bought by a hospital, they are able to obtain 340B discounts on your drugs,” he said. “So, in particular in the oncology space, where the price of drugs constitutes a large part of the income, there is a deep incentive for the hospital to want to buy the practice in oncology, and there is a fairly strong incentive for the practice of oncology to be part of a hospital because doctors get some [revenue] Also.”

In fact, more than 70% of hospital acquisitions from 2016 to 2024 had buyers who were 340B covered, according to Avalere Health, a consulting firm.

There are also “distorted prescription models” in 340b, said Gremminger. “Your incitement is now to buy the most expensive drug, as you get the biggest discount, prescribe more of this medication and mark it more,” he said. “And all the evidence shows that this is exactly what is happening.”

A report on health affairs has revealed that 340B hospitals prescribe biosimilars (which are cheaper than biological) 23 percentage points less often than non -340B hospitals.

All together, it creates a program that “costs us billions of dollars, and there is no advantage for the employer,” accused Gremminger. “Worse, just at a moral level, there is really limited evidence suggesting that the program really works as it was intended,” he added, noting that Cedars Sinai in Beverly Hills is a 340B hospital.

Beverly Hills is a rich neighborhood in Los Angeles with a median income of $ 127,979.

Jackson and Gremminger both refer to the recent report by Senator Cassidy, who noted that good aid Mercy Health and Cleveland Clinic, both covered by 340b, generated hundreds of millions of dollars in 340B income and did not transmit discounts directly on patients.

The Cleveland Clinic told Medcity News that the 340B program helps the organization save resources that would have been spent to buy medicines but could rather be used to provide care.

“In addition, the 340B program allows us to continue to take care of patients who cannot pay services, to invest in our local communities, to preserve critical subsidized health services, to provide continuous access to pharmacies and to provide pharmacy advantages to our patients,” a spokesperson said. “The Cleveland Clinic is the main service of Medicaid services, charity care and mental health services in the state of Ohio, thus serving a large population of rural patients and those who have very limited resources.”

What hospitals think

The American Hospital Association (AHA) told Medcity News that the 340B program was a “rescue buoy” for eligible hospitals, which allows them to develop access to care.

The organization has attributed program growth to external factors.

This includes “the decisions taken by pharmaceutical companies to constantly increase the prices of medicines and introduce new drugs on the market at record prices, with critical drugs costing millions of dollars to acquire. Interventions have all contributed to growth, “said Bharath Krishnamurthy, director of policies at AHA, in an email.

Krishnamurthy added that pharmaceutical companies spread poor information on the program to develop their results, giving the example of the 340B discount model that pharmaceutical companies are pressure. For example, last year, Johnson & Johnson said that he would stop providing initial discounts to disproportionate hospitals participating in the 340B program for Stelara and Blood Miner Xarelto Plate Plate. Instead, hospitals should buy medicines at a high price, then submit data to J & J to receive a discount later. The AHA urges the HHS to reject this effort.

Regarding the impact of the 340B program on employers, 340B Health supported during a recent press call that without 340B, employers would pay the same amount as they are now. 340B Health is a non -profit organization representing hospitals and health systems that participate in the similar medication reduction program.

“What they say is that because hospitals get a discount on 340B, this discount should be transmitted to Texin 340B Word and Head of Health Department.

Gremminger replied that this was not the case.

“I want to stipulate that we do not try to say that it should not be there, but if 340b was not there, we would pay the negotiated prices that we obtain in our PBM,” he said. “And again, there is a whole different problem with the PBM and the fact that they spoil with things, but there is no doubt that the price negotiated after the rebel that we obtain is lower than the completely negotiated list price that we must pay now because of 340B.”

A report from the National Alliance of Healthcare Buy Coalitions have also found that commercial prices are around 7% higher in 340B hospitals compared to large non -340B hospitals.

The reforms want

There are several reforms that the alliance would like to see with regard to 340B, but mostly the organization would like better transparency.

“How much do I lose as an employer?” Where is this money going? Who gets money?… In my mind, frankly, we need less hospitals in the program. The Cleveland clinic does not need to be in 340b. Cedars Sinai does not need to be in 340b, “said Gremminger.

He added that the scope of the program should really be limited to suppliers of safety nets, community health centers, rural hospitals and those dealing with a disproportionate part of low -income patients.

Jackson of the Economic Alliance for Michigan added that he wanted the program to come back to what it was intended.

“I don’t think they should invoice low and sell high.…. [They should] I cannot use the 340B income to buy more service lines, to go out and extend their footprint, “he said.” I think it should be used for patient care. “He added that income should also go to the shortage of labor and pay more money for suppliers.

Photo: Cagkansayin, Getty Images